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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Hon’ble Shri M.Balaganesh, AM ]
ORDER Per M.Balaganesh, AM
This appeal by the Assessee arises out of the order of the Learned Principal Commissioner of Income Tax-4, Kolkata [ in short the ld CIT] in Memo No. Pr.CIT-4/U/s.263/2015-16 dated 31.03.2016 passed u/s 263 of the Act against the order passed by the ITO, Ward-11(4), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 31.03.2016 for the Assessment Year 2011-12.
2. The only issue to be decided in this appeal is as to whether the Ld. CIT was justified in enhancing the assessment by directing the Ld. AO to make an addition
M/s Beatle Trading Pvt. Ltd. A.Yr.2011-12 towards share capital and share premium in the sum of Rs. 25,83,10,000/- under Section 68 of the Act, in the facts and circumstances of the case.
The brief facts of this issue is that the assessee is engaged in the business of trading and investment in equity shares and had electronically filed its return of income for the assessment year 2011-12 on 27.09.2011 declaring total income of Rs. 10,050/-. The assessment was completed u/s 143(3) of the Act on 31.03.2014 determining total income of Rs. 1,26,250/-. This assessment was sought to be revised by the Ld. CIT by invoking revisionary jurisdiction u/s 263 of the Act wherein the Ld. CIT observed that the Ld. AO had not made enquiries with regard to creditworthiness of the share subscribers and to verify the genuineness of the transaction thereon. The Ld. CIT observed that the assessee had received share capital of Rs. 2,05,76,420/- during the year together with share premium of Rs. 23,77,33,580/- (premium worked out at Rs. 499 per share). The Ld. CIT observed in his order that this huge premium was not justifiable in view of the fact that the assessee company had not carried on any commercial activities and had declared a meager income of Rs. 10,050/- only as is evident from the profit and loss account of the assessee. The Ld. CIT also observed that the assessee company does not have any fixed assets in its balance sheet, so as to imply the future potential to carry on any business. None appeared on behalf of the assessee before the Ld. CIT despite giving repeated opportunities. In view of these facts and circumstances, the Ld. CIT proceeded to conclude that the share capital together with receipt of share premium amounting to Rs. 25,83,10,000/- deserves to be added as unexplained cash credit u/s 68 of the Act and accordingly enhanced the assessment made by the Ld. AO. With these observations, he held that the order passed by the ld. AO u/s 143(3) of the Act to be erroneous and 2
M/s Beatle Trading Pvt. Ltd. A.Yr.2011-12 prejudicial to the interest of the assessee and directed the ld. AO to enhance the assessment accordingly. Aggrieved the assessee is in appeal before us on the following grounds:
1.(a) For that the order passed by the Learned Commissioner of Income Tax is bad in law and is liable to be quashed.
(b) For that the order passed by the Learned Commissioner of Income Tax dated 31.3.2016 passed under section 263 is barred by limitation.
(c) For that the order dated 31.03.2016 passed under section 263 is liable to quash in the absence of any finding by the Learned Commissioner of Income Tax that the assessment is erroneous as well as prejudicial to the interest of revenue.
On the facts and circumstances of the case, Commissioner of Income Tax was not justified in passing the order u/s 263 without giving proper opportunity of hearing/no opportunity of hearing. As such, the same is liable to be quashed.
3. For that in the facts and circumstances of the case, Learned Commissioner of Income Tax was not justified in treating the entire fresh share capital and share premium of Rs. 18,53,20,500/- as unexplained cash credit and treating the same as income of the Assessee company.
4. On the facts and circumstances of the case, Learned Commissioner of Income Tax was not justified in enhancing the income of the assessee by treating the entire share capital/premium raised as income u/s 68, when no addition under section 68 can be made in the instant case in view of the judgments of the Hon'ble Supreme Court in the case of Lovely Export 319 ITR (St.) 5 and also in the case of Bharat Engineering & Construction Co. Ltd. 83 ITR 187.
5. On the facts and circumstances of the case, Learned Commissioner of Income Tax ought to have considered that the order passed by the Assessing Officer was passed after proper inquiry or investigation on the issue of share capital.
On the facts and circumstances of the case, Learned Commissioner of Income Tax was not justified in holding the share capital/premium to be ingenuine on the basis of a generalized background and in the absence of any specific material against the assessee and on the irrelevant consideration.
M/s Beatle Trading Pvt. Ltd. A.Yr.2011-12 7. That the appellant craves leave to add, alter or delete all or any of the ground of appeal.
We have heard rival submissions. We find that the Ld. CIT had passed an order ex parte due to non-appearance on the part of the assessee before him. The Ld. AR before us filed an Affidavit duly notarized stating the reason for non- appearance before the Ld. CIT and prayed for setting aside the issue to the file of the Ld. CIT. We find that the Ld. CIT initially sought to invoke revisionary jurisdiction u/s 263 of the Act on the ground that the Ld. AO had not made enquiries with regard to creditworthiness of the share subscribers to pay share capital and share premium to the assessee company. From the perusal of the order of the Ld. CIT, we find that the Ld. CIT also had not conducted any enquiry to conclude that the share capital and share premium received by the assessee was bogus and we also find that the Ld. CIT did not have the benefit of further details that could have been filed by the assessee before him for justifying the share premium. Admittedly, the assessee had not appeared before the Ld. CIT despite repeated opportunities. From the Affidavit filed by the Ld. AR before us, we find that the assessee had been dependent on one Chartered Accountant who has been given the brief to handle the income tax affairs before the Ld. CIT and who in turn had not represented the assessee before the Ld. CIT and that the assessee was totally in dark with regard to subject mentioned proceedings and it came to the knowledge of the assessee only on receipt of the order of the Ld. CIT u/s 263 of the Act. We find the reasoning given in the Affidavit is understandable and deserved to be appreciated and hence we deem it fit and appropriate in these facts and circumstances, in the interest of justice and fair play, to remand the order of Ld. CIT to the file of the Ld. CIT for de novo adjudication of the issue raised by him, with regard to share capital and share premium, after giving reasonable 4
M/s Beatle Trading Pvt. Ltd. A.Yr.2011-12 opportunity of being heard to the assessee. Accordingly grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 10.01.2018